Question

PRACTICAL PROBLEMS

A, B and C were partners sharing profits and losses in the ratio of 3:2:1. On 31^st March, 2010. Their Balance Sheet was as follows:

Balance Sheet as on 31st March, 2010
Liabilities	Amount Rs	Assets		Amount Rs
Sundry Creditors	15,400	Cash at Bank		3,500
Bills payable	3,600	Stock		19,800
A’s loan A/c	10,000	Debtors	15,000
Capital Account:		Less: Provision	1,000	14,000
A	20,000	Join Life Policy		4,000
B	16,000	Plant and Machinery		43,700
C	8,000
Reserve Fund	12,000
	85,000			85,000

The firm was dissolved on 31^st March, 2010 and the assets realised as follows:

1) Join Life Policy was taken over by Mr. A at Rs 5,000.

2) Stock realised Rs 18,000, Debtors realised Rs 14,500, Plant and Machinery was sold for Rs 36,000.

3) Liabilities were paid in full. In addition one bill for Rs 700 under discount was dishonoured and had to be taken up by the firm.

4) There were no realisation expenses.

Give the Journal entries and necessary Ledger Accounts to close the books of the firm.

Answer 1

	Journal Entry
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Realisation A/c	Dr.		82,500
		To Stock A/c				19,000
		To Debtors A/c				15,000
		To Joint Life Policy A/c				4,000
		To Plant and Machinery A/c				43,700
		(Sundry Assets transferred to Realisation A/c)
		Sundry Creditors A/c	Dr.		15,400
		Bills Payable A/c			3,600
		Provision on Debtors A/c			1,000
		To Realisation A/c				20,000
		(Sundry Liabilities transferred to Realisation A/c)
		Bank A/c	Dr.		68,500
		To Realisation A/c				68,500
		(Assets realised)
		Realisation A/c	Dr.		19,700
		To Bank A/c				19,700
		(Liabilities paid off)
		A’s Capital A/c	Dr.		5,000
		To Realisation A/c				5,000
		(Joint Life Policy taken over by Mr. A for Rs 5,000)
		A’s Capital A/c			4,350
		B’s Capital A/c			2,900
		C’s Capital A/c			1,450
		To Realisation A/c				8,700
		(Loss on realization transferred to Partner’s Capital A/c)
		Reserve Fund	Dr.		12,000
		To A’s Capital A/c				6,000
		To B’s Capital A/c				4,000
		To C’s Capital A/c				2,000
		(Reserve Fund transferred to Partner’s Capital A/c)
		A’s Loan A/c	Dr.		10,000
		To Bank A/c				10,000
		(A’s Loan has been paid off)
		A’s Capital A/c	Dr.		16,650
		B’s Capital A/c	Dr.		17,100
		C’s Capital A/c	Dr.		8,550
		To Bank A/c				42,300
		(Amount paid off to Partner on account of final settlement)

Realisation Account
Dr.	Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Sundry Assets:				Sundry Liabilities:
Stock		19,800		Provision on Debtors	1,000
Debtors		15,000		Bills Payable	3,600
Joint Life Policy		4,000		Sundry Creditors	15,400	20,000
Plant and Machinery		43,700	82,500
				Mr. A’s Capital A/c (Joint Life Policy)		5,000
Bank A/c:				Bank A/c:
Creditors		15,400		Stock	18,000
Bills Payable		3,600		Debtors	14,500
Bill Dishonoured		700	19,700	Plant and Machinery	36,000	68,500
				Loss transferred to:
				A’s Capital A/c	4,350
				B’s Capital A/c	2,900
				C’s Capital A/c	1,450	8,700
			93,500			93,500

Partners’ Capital Accounts
Dr.	Cr.
Particulars		A	B	C	Particulars	A	B	C
Realisation A/c (Loss)		4,350	2,900	1,450	Balance b/d	20,000	16,000	8,000
Realisation A/c (Joint Life Policy)		5,000			Reserve fund	6,000	4,000	2,000
Balance c/d		16,650	17,100	8,550
		26,000	20,000	10,000		26,000	20,000	10,000

Bank Account
Dr.	Cr.
Particulars		Amount Rs	Particulars		Amount Rs
Balance b/d		3,500	Realisation A/c (Liabilities)		19,700
Realisation A/c (Assets)		68,500	Capital A/cs:
			A	16,650
			B	17,100
			C	8,550	42,300
			A’s Loan A/c		10,000
		72,000			72,000

A’s Loan Account
Dr.	Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Bank A/c		10,000	Balance b/d	10,000
		10,000		10,000

Note: As per the book amounts paid to A, B and C is Rs 16,650, Rs 16,700 and Rs 8,950 respectively but as per our solution it should be Rs 16,650, Rs 17,100 and Rs 8,550 respectively.